It’s that time of year. Very shortly your tax preparer will be sending you an Organizer for your 2013 tax return.

Just in case you are getting organized early, here are a few of my thoughts on items you might overlook in your preparations which could lead to missed deductions and over payment of taxes.

 Make sure you have the correct information for the purchase cost for your investments. You don’t want to pay more capital gains tax than you legitimately owe at the time of sale. If you’ve inherited assets or you just haven’t been a great record keeper this could take a little time so start early.

 Thoroughly review all expenses related to rental properties and Schedule C business so as not to overlook any deductions. If in doubt about an item, include it and let your tax preparer help you decide.

 If you’ve made charitable contributions of more than $250 ( and you expect to itemize deductions) and you don’t have a written receipt, contact the organization now and obtain a receipt prior to filing your tax return. Otherwise you can’t take the deduction.

 Did you drive for charitable or medical purposes? Miles can add up to a larger deduction than you might think.

 Expenses paid from Health Savings Accounts are deductible medical expenses. If you or your spouse is over 65, the floor for deducting medical expenses is still 7.5%.

 Some or all of your long term care premiums is a deductible medical expense.

 Did you provide more than half the support for an individual living in your home for more than 6 months last year who might have been unemployed or earned very little? Let you preparer know, this could create a tax savings.

 IRA distributions; if you made contributions to your IRA(s) between 1982 – 1995 document the contributions and let your tax preparer know so that you don’t overpay California tax on current or future distributions.

 Don’t forget, you can make an IRA contribution until April 15, 2014.

 If you’re self employed with net income last year and you don’t have a retirement plan in place, you can still establish a SEP IRA before you file your taxes.

 Do you use a room in your house exclusively for your home office as the principal place of business but haven’t wanted to hassle with this deduction? Let your preparer know, as there is now a safe harbor deduction.

 Did you install new energy saving appliances or solar panels last year?

 Did you buy an alternative energy car/motorcycle/or other 3 wheeled vehicle? Sounds like fun and a possible tax credit.

 Did you pay any household workers more than $1,800?

 Children in college and working part-time? Let your tax preparer know, especially if they don’t prepare the returns for all family members, so that they can determine the most beneficial treatment of tax credits between you and your child’s return.

 Don’t forget the fees you paid me and all other financial professionals. These are included as miscellaneous deductions on Schedule A if you itemize.

These are just a few items to consider as you’re gathering and organizing your records. The sooner you get started the sooner this chore will be over!

Best Regards,
Brooke

Happy New Year from Salvini Financial Planning
-Brooke, Bonnie, Yvette & Gyspy

We hope the holidays were a time of enjoyment, relaxation, and renewal for you and your loved ones. After our own time away from the office, we are eager to get back to work helping you with your financial decisions in 2014.
Within our holiday photo we are able to introduce the newest member that has joined the Salvini Financial Planning team. Yvette comes on board as a CPA with a shared passion for personal financial planning. Her expertise in tax planning and other financial matters will continue to improve what we offer.

Bonnie celebrated her 4th anniversary this past October with Salvini Financial Planning. Bonnie is responsible for the much complimented Salvini Financial Planning website and all matters that keep our office functioning smoothly.

I am grateful to work with Bonnie and Yvette, both of whom bring commitment, compassion, and fun to the work we do for you. On a personal note, we all share a love of horses and look forward to 2014 The Year of the Horse.

Thoughts on the Market

2013 was certainly a strong year of recovery for the US stock market. The overall return of the S&P 500 was 32.4%. The experience of watching $40 trillion of wealth restored to our economy since March 2009 and the impact on portfolios has been very pleasant.

Indicators for overall corporate health (cash on hand, debt to equity, inventory turnover, manufacturing purchase orders) are positive and unemployment is slowly declining. Housing is still under built compared to demand, and affordability of mortgages as measured by mortgage payments as a percentage of net income, is far below historical average. There is $10.8 trillion sitting in cash accounts. These fundamentals appear positive for a continued recovery of our economy and market growth.

That being said, the wild cards of government policy and erratic investor behavior in response to changes in government policy, temper expectations for 2014. As usual, my advice for dealing with this type of uncertainty from which we can’t escape, is to focus on the areas we can control.

If you haven’t rebalanced your portfolio in the last 9-12 months this is the right time to take advantage of the good US stock returns of 2013 by selling high and adding to some asset classes such as emerging markets and commodities that “are on sale” because of lack luster performance in 2013. Rebalancing is a proven strategy for better investment returns. And it’s within your control unlike predicting the direction of interest rates next year, market returns next week, the passage of tax reform, etc…

Within Your Control

Just a quick reminder of a few other important decisions within your control that dramatically impact financial success and don’t involve predicting the unpredictable:
• Spending on what is truly important to you rather than just on passing whims and saving for what really matters to you.
• Protecting your wealth against disasters
• Controlling investment costs
• Diversifying
• Minimizing taxes
• Avoiding reactive decisions
• Taking regular “vacations” from watching the news

This is Interesting

A study published last fall in The Journal of Retirement Planning conducted by Morningstar indicates that investors who work with a financial planner can get higher portfolio returns during retirement simply because a financial planner helps you make better decisions.

Planning Considerations for the New Year

Keep some extra cash on hand if your 2013 Adjusted Gross Income will exceed $250,000 until you determine your final tax liability which may be higher than in past years due to the new 3.8% Medicare surcharge tax. For higher incomes you may also feel the impact of the phase out of personal exemptions and itemized deductions.

Adjust 2014 W-4 allowances to balance your withholdings. Zero tax liability with your return rather than a refund or balance due is the optimal strategy.

Since you’re organizing your records for taxes, take advantage of this opportunity to prepare or update your emergency “Grab It Book”. I’ve attached a Table of Contents.

If you plan to make charitable contributions this year, consider giving appreciated stock rather than cash to avoid realizing capital gains. And if you are taking Required Minimum Distributions from IRAs, you can make charitable contributions directly from your IRA that will satisfy your RMD requirement.

With a new year comes a new $14,000 annual gift exclusion for as many gifts to different individuals that you’d like to give.

If you contributed to a Flexible Spending Account for medical expenses in 2013 through your employer but didn’t use all the funds last year, check to see if your plan offers a grace period or possible carryover so you don’t lose the funds you set aside.

Do you have any foreign bank accounts or other assets? It’s very important to discuss these with your tax preparer as the penalties for non-reporting are onerous.

An finally, if you still don’t have your Health Care Directive prepared there is no time like now to get it done!

A Book to Read

Saving For Retirement (without living like a pauper or winning the lottery) – written by Gail Marks Jarvis

Follow Us

My personal new year’s resolution is to post here to my Blog and Twitter on a more consistent basis to make sure I’m sharing important timely information. I also plan to try a video post or two.
I am wishing you a wonderful 2014 and hoping you will realize your financial goals and enjoy peace of mind regardless of the ups and downs the markets will throw at us.
Sincerely, and until our next post…
Brooke